CMG Watch

Chipotle Mexican Grill Inc. (CMG) has moved back into bull phase after a quick bearish whipsaw, as it sails toward the earnings announcement on Oct. 21

	trend	sto	sto zone	pps	psar	macd	macd trend	ma20	ma200
CMG $175.86

There is much to like about this stock as a bull play. Let us begin.

The company's debit is a mere 0.01% of equity, an astonishingly low debt "burden".

The return on equity is a respectable 21.5% -- nothing to hate there.

More to like: Instutional ownership is 93%, price to sales 3%, average annual revenue growth the past four years is nearly 25%.

On the chart, near-term the stock has been in an uptrend since July, and more broadly since October 2008. All the near-term signals that I track show bull phase.

On the Person's chart, the stock is trading at the upper weekly pivot point, which acts as resistance.

Person's Table

	pps	pps open	upper pivot	lower pivot
$175.86		$168.50 sep24	$175.91 +0.03%	$167.19 -4.9%

What's not to like about CMG is this: It's an old uptrend. The stock is well off of its recession lows and is well above both moving averages.

Now, 5% above the 20-day moving average I might be willing to take. There could certainly be some upside left. But 36% above the 200-day moving average? And 14% above the 50-day moving average? Both of those figures suggest that the stock is overdue for a near-term correction.

Reversal Levels

• $176.59, +0.4% (all-time high)
• $175.86 <== You are here.
• $166.77, -5.2% (20-day moving average)
• $164.19, -6.6% (recent low)
• $129.68, -26.3% (200-day moving average)

So, it's a tougher call than it would initially seem. Also, the looming earnings report will increase the odds of a news surprise. One way to play it: Open a bull position, and be prepared to jackrabbit out anytime the price closes below a very short-term moving average, perhaps five days or even three days.

Another, more patient strategy would be to wait for a pullback before opening the position.

Disclaimer

Tim Bovee, Private Trader tracks the trades of a private trader for his own accounts. Nothing in this blog constitutes a recommendation to buy or sell stocks, options or any other financial instrument. The only purpose of this blog is to provide education and entertainment. No trader is ever 100 percent successful in his or her trades. Trading in the stock and option markets is risky and uncertain. Each trader must make trading decision decisions for his or her own account, and take responsibility for the consequences.

Abbreviations:

• pps - Person's Proprietary Signal.
• psar - Parabolic Stop and Reverse
• ma20 - 20-day moving average
• ma200 - 200-day moving average
• macd - Moving Average Convergence-Divergence
• sto - Fast Stochastic

About the glance: The colors indicate the state of each signal.

• trend: Determined by the 5-day moving average, green for up, red for down, yellow for sideways.
• sto: green for bull, red for bear.
• sto zone: green for overbought (80+), red for oversold (20-), yellow for neutral zone
• psar, pps, macd: green for bull mode, red for bear.
• macd trend: green for rising, yellow for sideways, red for falling.
neutral.
• ma20, ma200: green for above the average by more than 1%, red for below the average by more than 1%, yellow for within 1% either side of the average.